Small business group report aims to revive RBS scandal

Efforts are being led in part by Nikki Turner, an SME Alliance director.

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Royal Bank of Scotland

Royal Bank of Scotland’s hopes of putting another major scandal to rest may be upended by a small business group that wants to see executives held to account.

The SME Alliance – a small business group that lobbies for fair treatment by banks and advisers – is launching its own investigation into the treatment of small firms by the bank’s now-defunct Global Restructuring Group (GRG).

Efforts are being led in part by Nikki Turner, an SME Alliance director who is well known for a separate report in 2009 credited with helping uncover fraud at HBOS in Reading.

That case led to corrupt financiers being jailed over a £245 million loans scam which destroyed several businesses.

The SME Alliance’s report into the GRG aims to gather “evidence of dishonesty and lack of integrity by RBS executives” which it hopes will allow the Financial Conduct Authority (FCA) to take disciplinary action through a piece of regulation known as the senior managers’ regime (SMR).

While the SMR only came into force in 2016 and cannot be retroactively enforced, the SME Alliance expects to have evidence alleging RBS covered up the behaviour at the GRG after it was introduced, and failed to co-operate or notify authorities of behaviours that would breach the regulations.

It also hopes to bring the case into the jurisdiction of the FCA by showing that in the majority of cases, the bank insisted on personal guarantees for small business loans that could categorise them as personal finance transactions.

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Commercial lending to SMEs (small and medium-sized enterprises) is still not regulated by the FCA.

The allegations and arguments will be laid out in a report that will be handed to the FCA and made public by year-end.

Ms Turner said: “Our members are extremely frustrated that the regulators are unable to take any action against RBS and its bankers.

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“The FCA say it cannot find any way to take action – we aim to help them ensure that the guilty bankers are brought to book.”

RBS and the FCA declined to comment.

The FCA last month reached a conclusion in its four-year GRG probe, which saved RBS and its senior managers from facing disciplinary action over the treatment of small firms.

The FCA said the GRG’s activities were not within its remit so its powers did not apply.

It added that action against senior management in the GRG for lack of fitness and propriety “would not have reasonable prospects of success”.

That was despite an independent report into the GRG by Promontory Financial Group which showed there was “widespread inappropriate treatment of customers”.

However, it said there was no evidence that “defaults were engineered to transfer businesses to GRG simply to generate revenue for RBS through fees”.

The FCA also said it found no evidence of dishonesty or lack of integrity.

The regulator has faced widespread criticism over its handling of the four-year investigation.